Surplus in GDP
Definition
Surplus in GDP refers to a situation where an economy's gross domestic product (GDP) exceeds its total spending or aggregate demand.
Analogy
Imagine going shopping with $100 but only spending $80 on various items. The $20 remaining represents a surplus in your spending, similar to how a surplus in GDP occurs when the total output of an economy exceeds its spending.
Related terms
Deficit in GDP: The opposite of a surplus, where an economy's total spending or aggregate demand exceeds its gross domestic product (GDP).
Consumption: The expenditure by households on goods and services, which is one component of aggregate demand.
Investment: The expenditure by businesses on capital goods such as machinery and equipment, also a component of aggregate demand.
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